Megaupload Shut Down by U.S. Prosecutors

MegaUpload, one of the world’s largest file-sharing sites, was shut down Thursday, and its founder and several company executives were charged with violating piracy laws, federal prosecutors said.

An indictment accuses Megaupload.com of costing copyright holders more than $500 million in lost revenue from pirated films and other content. The indictment was unsealed one day after websites including Wikipedia and Craigslist shut down in protest of two congressional proposals intended to thwart online piracy.

The Justice Department said in a statement said that Kim Dotcom, formerly known as Kim Schmitz, and three others were arrested Thursday in New Zealand at the request of U.S. officials. Two other defendants are at large.

Late last year, the site became an even greater magnet for controversy after it released a song and video featuring Kanye West, Will.I.Am, Swizz Beatz and many other celebrities apparently endorsing the site.

Megaupload was unique not only because of its massive size and the volume of downloaded content, but also because it had high-profile support from celebrities, musicians and other content producers who are most often the victims of copyright infringement and piracy.

The Hong Kong-based company listed Swizz Beatz, who married Keys in 2010, as its CEO.

Before the site was taken down, it posted a statement saying allegations that it facilitated massive breaches of copyright laws were “grotesquely overblown.”

“The fact is that the vast majority of Mega’s Internet traffic is legitimate, and we are here to stay. If the content industry would like to take advantage of our popularity, we are happy to enter into a dialogue. We have some good ideas. Please get in touch,” the statement said.

A lawyer who represented the company in a lawsuit last year declined comment Thursday.

Megaupload is considered a “cyberlocker,” in which users can upload and transfer files that are too large to send by email. Such sites can have perfectly legitimate uses. But the Motion Picture Association of America, which has campaigned for a crackdown on piracy, estimated that the vast majority of content being shared on Megaupload was in violation of copyright laws.

The website allowed users to download films, TV shows, games, music and other content for free, but made money by charging subscriptions to people who wanted access to faster download speeds or extra content. The website also sold advertising.

The indictment was returned in the Eastern District of Virginia, which claimed jurisdiction in part because some of the alleged pirated materials were hosted on leased servers in Ashburn, Va.

Dotcom, a resident of both Hong Kong and New Zealand, and a dual citizen of Finland and Germany, made more than $42 million from the conspiracy in 2010 alone, according to the indictment.

Dotcom is founder, former CEO and current chief innovation officer of Megaupload.